Motherson Sumi: Vrooming on the global highway

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Automobile component manufacturer Motherson Sumi Systems Ltd (MSSL) spotted opportunities during the downturn, made propitious acquisitions – Visiocorp in March 2009 (now renamed Samvardhana Motherson Reflectec) and Peguform in November 2011 (now renamed Samvardhana Motherson Peguform) – and more than doubled turnover in  five years.

Says Pankaj Mittal, chief operating officer, MSSL, “Visiocorp was our joint venture partner. After the Lehman crises, Visiocorp was running severe losses. We decided to acquire the company and that became a game-changer for us. It helped us gain global scale. Six months after the acquisition, we got huge orders. We set up our largest unit for rearview mirrors in Hungary and also established greenfield (new) units in Thailand, China and Brazil to meet customer requirements in emerging geographies.”

The added benefit of the acquisitions stemmed from enabling MSSL to expand its core business of wiring harnesses abroad. “Setting up a greenfield facility in a new market is difficult. But in the countries we gained presence overseas through our acquisitions, it became easier for us to establish additional units”, Mittal adds. Currently, MSSL has 157 manufacturing units spread across 25 countries and new units are being put up in Germany and US.

As of September 2013, the company had orders of Euro 4.3 billion alone for its European operations. German-headquartered SMP, a maker of car bumpers, accounts for Euro 1.8 billion of new orders, and SMR had received orders worth Euro 842 million till September 2013. The company is quite confident of maintaining its growth rate, given the momentum in the US, and a steady order stream from German manufacturers. In the first nine months of this financial year, SMR and SMP with combined turnover of Rs 17,877 crore contributed 81 per cent to MSSL’s consolidated sales.

When it started in the mid-1980s, the company worked largely with Maruti Suzuki. In 1999, it decided to shed its dependence on one client or geography. It also resolved to grow its content per car and be a one stop solutions provider for OEMs than a manufacturer of individual components/products. To achieve the scale it had in mind, MSSL had to look beyond India. International business, which accounted for 29 per cent of MSSL’s revenues of around Rs 1,000 crore in 2005, is estimated to constitute 85 per cent of MSSL’s expected turnover of $5 billion in FY14.

MSSL says it makes five-year vision plans because it knows that in any business cycle, there are likely to be one or two years of downturn, as happened with the Lehman crises. MSSL plans to invest Rs 800 crore each year for the next two years in expanding production capacity across countries.